The Federal Reserve isn't sticking with the schedule of interest rate cuts it predicted earlier in the year. That makes navigating the market more challenging.
Just a few months ago, most economists expected the Federal Reserve to kick start rate cuts by May. All signs pointed to this: the fight against inflation appeared to be coming to an end, jobs data promised a cooling labor market on the horizon, and consumer confidence began to falter.
Fast forward to May’s Federal Open Market Committee (FOMC) meeting, however, and the hopes of a rate cut in the first half of 2024 are quickly diminishing. Indeed, it appears likely the Fed will hold rates where they are for much longer than anyone could have imagined back in January. Some market commentators even think we're stuck with “higher for longer” until 2025, despite the pressure of an imminent presidential election.
Whether rates stay put until September or next January, the May FOMC meeting was certainly a far cry from December 2023, when Fed Chairman Jerome Powell first mentioned rate cuts, sending markets into a frenzy. Now, we're seeing a much more hawkish committee, resolute in its restrictive monetary policy stance in the face of stubborn inflation and a labor market that refuses to stumble.
